Credit risk hedging system, method and apparatus

Abstract

Systems, methods, apparatus, computer program code and means for hedging credit risk associated with a leveraged lease equity transaction are provided.

1 . A method for performing a transaction, comprising: 
 identifying an entity, said entity holding assets on lease and receiving rent payments on a lease, said entity having a beneficial interest owned by a leveraged lease equity investor; and    establishing an agreement between said leveraged lease equity investor and a hedge counterparty, said agreement identifying a credit event associated with said lease and obligating said leveraged lease equity investor to deliver said beneficial interest to said hedge counterparty upon the occurrence of said credit event.    
   
   
       2 . The method of  claim 1 , further comprising: 
 establishing a second agreement between said hedge counterparty and third party investors, said second agreement obligating said hedge counterparty to deliver said beneficial interest to said third party investors upon the occurrence of said credit event.    
   
   
       3 . The method of  claim 1 , wherein said hedge counterparty is unaffiliated with a party to the leveraged lease transaction.  
   
   
       4 . The method of  claim 1 , wherein said agreement is a swap agreement.  
   
   
       5 . The method of  claim 1 , wherein said agreement between said leveraged lease equity investor and said hedge counterparty is a letter of credit  
   
   
       6 . The method of  claim 1 , wherein said credit event is a readily ascertainable event indicating a credit loss.  
   
   
       7 . The method of  claim 6 , wherein said credit event is substantially short in time.  
   
   
       8 . The method of  claim 7 , wherein said credit event is at least one of: 
 (a) a Chapter 11 bankruptcy and notice of lease termination by entity or lease debt holders;    (b) a Chapter 11 bankruptcy and rejection of said lease by a lessee;    (c) a failure to pay rent by the lessee and a notice of lease termination by entity or lease debt holders; or    (d) a Chapter 7 liquidation of lessee.    
   
   
       9 . The method of  claim 2 , wherein said second agreement is a credit linked instrument having a face amount equal to an amount paid by said leveraged lease equity investor for said beneficial interest.  
   
   
       10 . The method of  claim 9 , wherein said credit linked instrument is at least one of a note or a loan.  
   
   
       11 . The method of  claim 9 , wherein said credit linked instrument pays a coupon amount equal to a yield from collateral purchased by said hedge counterparty and a premium amount paid on said agreement between said leveraged lease equity investor and said hedge counterparty.  
   
   
       12 . The method of  claim 11 , wherein said agreement obligates said hedge counterparty to redeem said collateral and deliver proceeds to said leveraged lease equity investor upon the occurrence of said credit event.  
   
   
       13 . A method for issuing a note to hedge risk of credit loss in a leveraged lease equity investment, comprising: 
 entering into a credit default swap obligating an leveraged lease equity investor to transfer an equity interest in a leveraged lease equity investment upon the occurrence of a specified credit event associated with the leveraged lease investment; and    issuing a note to a third party investor in exchange for payment of a principal amount, the note secured by an amount of collateral and by a commitment to transfer said leveraged lease equity interest to said third party investor upon the occurrence of said specified credit event.    
   
   
       14 . A method, comprising: 
 entering into an agreement with a hedge counterparty, said agreement specifying a credit event upon which the hedge counterparty will deliver a beneficial interest in a trust holding assets on lease; and    issuing an instrument to a third party investor, said instrument secured by a security interest in defined collateral and a right by said third party investor to receive said beneficial interest upon occurrence of said credit event.    
   
   
       15 . A system, comprising: 
 a processor; and    a storage device in communication with said processor and storing instructions adapted to be executed by said processor to: 
 identify a entity, said entity holding assets on lease and receiving payments on a lease, said entity having a beneficial interest owned by a leveraged lease equity investor;  
 establish an agreement between said leveraged lease equity investor and hedge counterparty, said agreement identifying a credit event associated with said lease and obligating said leveraged lease equity investor to deliver said beneficial interest to said hedge counterparty upon the occurrence of said credit event; and  
 establish a second agreement between said hedge counterparty and a third party investor, said second agreement obligating said hedge counterparty to deliver said beneficial interest to said third party investor upon the occurrence of said credit event.